According to Ernst & Young's World Islamic Banking Competitiveness Report 2013, Islamic banking assets with commercial banks globally grew to USD 1.3 trillion in 2011, suggesting an average annual growth of 19 per cent over past four years (24 per cent in 2011). The top four markets account for 84 per cent of industry assets.

"The Islamic banking growth story continues to be positive, growing 50 per cent faster than the overall banking sector.

"High potential international markets ¿ each in different stages of development and therefore requiring different penetration strategies - include Saudi Arabia, Malaysia, Qatar, Turkey and Indonesia," said the report.

This year, E&Y has launched the EY Islamic Banking Universe that tracks industry performance across core Islamic finance markets with a combined GDP of USD 5 trillion in 2011.

Islamic banking assets are forecast to grow beyond the milestone of USD 2 trillion by 2014, the report added.

Islamic banks continue to grapple with multiple challenges relating to sub-scale operation, asset quality, negative operating income from core activities and a weak risk culture, it said, adding "the severity of performance challenge has prompted several institutions to initiate wide-ranging transformation programs."